Coffee Day Enterprises Ltd vs Securities And Exchange Board Of India

We have heard Mr. Janak Dwarkadas, the learned senior counsel for the appellant and Mr. Pradeep Sancheti, the learned senior counsel for the respondent.

Let a reply be filed by the respondent within three weeks from today. Rejoinder may be filed within three weeks thereafter. The matter may be listed for admission and for final disposal on May 2, 2023.

SEBI issued a show cause notice dated December 7, 2021 with regard to diversion of funds amounting to Rs. 3535 crore from 7 subsidiaries of the company Coffee Day Enterprises Ltd. and Mysore Amalgamated Coffee Estates Ltd. (MACEL). The Whole Time Member after considering the matter has issued a slew of directions, namely, that the appellant shall take steps to recover the entire dues from MACEL and its related entities and, in this regard, in consultation with NSE shall appoint an independent law firm who shall file suits and take steps to recover the money. This law firm will act independently and will function under the oversight of the NSE. The WTM further imposed a penalty of Rs. 26 crore upon the appellant.

We find that the company was under the control of the then Chairman and Managing Director Mr. V. G. Siddhartha who committed suicide and left a suicide note. In this note, it was stated that he was solely responsible for the financial transactions of his company and that the auditors, senior management and members of his family were totally unaware of the transactions. We find that SEBI also conducted an investigation and in its report found that V. G. Siddhartha was the sole person who was responsible for the transfer of funds from the 7 subsidiaries of the company to MACEL and that the board of directors of the company were unaware of the transfer since such transfers were made without the approval of the board.

We also find that the company is now being headed by the widow of V. G. Siddhartha and board of directors also consists of four independent directors.

In the light of the aforesaid, we are not inclined to stay the directions issued by the WTM in paragraph No. 73(a) to (f). We however direct that in view of the investigation made by SEBI and the note of Late V. G. Siddhartha, we stay the imposition of penalty passed by the WTM during the pendency of the appeal subject to the condition that the appellant shall furnish an undertaking to SEBI within four weeks from today to the effect that they would deposit the amount as per the impugned order within four weeks from the date of decision of this Tribunal if it goes against them.

This order will be digitally signed by the Private Secretary on behalf of the bench and all concerned parties are directed to act on the digitally signed copy of this order. Certified copy of this order is also available from the Registry on payment of usual charges.